Why U.S. chipmakers want government help

There’s been a lot of news about a global shortage of semiconductor chips lately. Overwhelming demand for chips during the pandemic has affected the production of everything from autos to video game consoles to laptops and cell phones. 

Now the U.S. Semiconductor Industry Association has sent a letter to President Joe Biden asking him for “robust funding for [domestic] semiconductor manufacturing and research” in future relief packages.

American companies are big players in the semiconductor industry. They have a large share of the market for equipment that fabricates the chips, as well as for the software and design of them.

But when it comes to actually manufacturing the chips themselves, the U.S. falls behind, said C.J. Muse, research analyst with investment banking advisory firm Evercore ISI.

“Roughly only 12% of semiconductors are made in the U.S. Other nations are giving heavy subsidies to produce elsewhere,” Muse said.

Those subsidies have helped manufacturers in Taiwan and China build multi-billion dollar manufacturing plants. In turn, that’s helped Asian chipmakers bring down production costs, according to Stacy Rasgon, managing director and senior analyst for U.S. Semiconductors at Bernstein Research.

“And these are things that are difficult to reverse,” he said.

Last month, American chipmaker Intel said it’s likely to send more manufacturing overseas.

It’s hard to reverse that momentum, and Rasgon said the U.S. needs to shell out a lot more money to open more domestic semiconductor plants.

“And then how are you going to staff them? We need education reform, and immigration reform. I think there needs to be a holistic effort here if we’re serious.”

The White House said that Biden is expected to sign an executive order reviewing chip production issues in the coming weeks.

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